APPENDIX B
THE PRUDENTIAL CODE FOR CAPITAL FINANCE:
PRUDENTIAL INDICATORS
1.
Prudential Indicators: the actual position
Actual Capital Expenditure for 2007/08
1.1
1.2
non-HRA
HRA
After the year-end, the actual capital expenditure incurred during the financial year will be
recorded. This prudential indicator will be referred to as actual capital expenditure and shall be
expressed as ‘actual capital expenditure for 0X/0Y’. The Code also requires separate
identification of the actual HRA and non-HRA elements of this Prudential Indicator. (Prudential
Code, paragraph 51 & 52).
Actual capital expenditure for 07/08
2.
non-HRA
£X.Xm
HRA
£X.Xm
Prudential Indicators for Affordability
Prudential Indicators for Affordability: Estimates of the incremental impact of capital investment
decisions on the Council Tax and on housing rents.
2.1
2.2
non-HRA
HRA
Blackpool is required to:
(i)
forecast the total non-HRA budgetary requirements for the authority based on no changes
to the existing capital programme.
(ii) forecast the total non-HRA budgetary requirements for the authority with the changes
proposed to the capital programme included in the calculation.
(iii) take the difference between (i) and (ii) and calculate the addition or reduction to Council tax
that would result.
(iv) forecast the total HRA budgetary requirements for the authority based on no changes to
the existing capital programme.
(v) forecast the total HRA budgetary requirements for the authority with the changes proposed
to the capital programme included in the calculation.
(vi) take the difference between (iv) and (v) and calculate the addition or reduction to average
weekly housing rents that would result.
These two Prudential Indicators (Prudential Code, paragraph 40) will be referred to as
‘estimates of the incremental impact of new capital investment decisions on the Council
Tax/average weekly housing rents’ and shall be expressed in the following manner: £xx.xx.
These indicators of the incremental impact of their capital investment decisions allow the effect
of the totality of Blackpool Council’s plans to be considered at budget setting time. They also
allow different options for the capital investment programme to be considered by comparing the
different impact on council tax (and housing rents) that would result, holding all other things
constant other than varying the capital programme. Moreover, these indicators take into
consideration the effects of self-financing and the effects of government support. They also
reflect the revenue impact of capital schemes other than financing costs, thus facilitating the
consideration of revenue intensive vis-a-vis capital intensive options.
Incremental impact of new capital
investment decisions
on the Council Tax
on the average weekly
housing rents
£10.85
£12.58
£9.56
£0.00
£0.00
£0.00
2008/09
2009/10
2010/11
3.
Prudential Indicators for Prudence
Prudential Indicators for Prudence: Capital Expenditure (including capital commitments).
3.1
3.2
non-HRA
HRA
Local authorities are required to make reasonable estimates of the total of capital expenditure
that they plan to incur during the forthcoming financial year and at least the following two
financial years. These Prudential Indicators shall be referred to as the ‘estimate of total capital
expenditure to be incurred in years 1, 2 and 3’. A local authority that has a Housing Revenue
Account (HRA) will identify separately estimates of HRA capital expenditure and estimates of
non-HRA capital expenditure. (Prudential Code, paragraphs 48 & 49).
The Strategic Asset Management Group in conjunction with the capital finance team have
completed the capital programme likely to be required over the next three years, together with
the financial resources likely to be available for those schemes. This has taken into account new
borrowing for which the government is providing resources to meet interest and debt repayment
costs in the formula spending share, government grants, capital receipts, financial viability, and
other funding (including s106 receipts). The current estimates of capital expenditure that should
be funded is:
2008/09
2009/10
2010/11
Total schemes
Non-HRA
schemes
HRA
schemes
£122.0M
£119.6M
£121.7M
£104.4M
£99.8M
£101.8M
£17.6M
£19.8M
£19.9M
The above figures have to be approved in the January 2008 Capital Programme report. The
Council may as part of its budget considerations in future years decide to approve a lower level
of capital expenditure - thus reducing the costs of financing in the revenue budget - or a higher
level of capital expenditure if there is scope. Making cost savings or generating income
elsewhere, or by adjusting the level of council tax to achieve the desired balance of outcomes
can achieve this flexibility. Capital expenditure remains higher than Blackpool’s historical levels
because it is currently inflated by the gross costs of the Masterplan, the Coastal Protection
schemes and the ALMO bid.